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How Utilities’ Returns Compare with Broader Markets’

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Total returns

Utility stocks, generally seen as bond substitutes due to their stable dividends, have rallied significantly. Amid broader market uncertainty driven by geopolitical tensions, investors have turned to safer utility stocks. 

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Utilities have outperformed broader markets over the past year, with the Utilities Select Sector SDPR ETF (XLU) returning 18% and the S&P 500 returning 11% (considering both capital appreciation and dividends).

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Averaged over the last five years, utilities (IDU) have returned 10% compounded annually, in line with broader markets. Currently, utility stocks’ average dividend yield is 3.1%, higher than broader markets’ yields and the benchmark Treasury yields. Like dividend yields, dividend growth is a major driver of investors’ long-term returns.

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